Which accounts are impacted by the December 14th receipt at the apartment complex, including $12,004 for sprinkler repairs, $1,000 in product sales, and $500 in inventory?

Which accounts are impacted by the December 14th receipt at the apartment complex, including $12,004 for sprinkler repairs, $1,000 in product sales, and $500 in inventory?

• A. Service revenue
• B. Sales revenue
• C. Inventory
• D. Service revenue, Sales revenue, Inventory, and Cost of goods sold

Answer: (D)

When a single receipt includes service work, product sales, and the use of inventory, multiple parts of the accounts system are touched. The sprinkler repairs represent earning revenue from a service, so Service Revenue increases. The product sale represents earning revenue from selling goods, so Sales Revenue increases as well. Since the sale involved inventory, the Inventory asset decreases to reflect the goods that were sold, and that cost is recognized as an expense in Cost of Goods Sold. So that one transaction affects Service Revenue, Sales Revenue, Inventory, and Cost of Goods Sold all at once. The other options don’t capture all of these effects, which is why they aren’t the best fit.

When a single receipt includes service work, product sales, and the use of inventory, multiple parts of the accounts system are touched. The sprinkler repairs represent earning revenue from a service, so Service Revenue increases. The product sale represents earning revenue from selling goods, so Sales Revenue increases as well. Since the sale involved inventory, the Inventory asset decreases to reflect the goods that were sold, and that cost is recognized as an expense in Cost of Goods Sold. So that one transaction affects Service Revenue, Sales Revenue, Inventory, and Cost of Goods Sold all at once. The other options don’t capture all of these effects, which is why they aren’t the best fit.